Stocks rose globally yesterday while the yen tumbled, after the Bank of Japan (BOJ) poured cold water on monetary tightening expectations, and economic and earnings data proved cheery for European markets.
In addition, data showed that inflation in the UK dropped to a three-month low of 10.5 percent last month, the latest sign that global inflationary pressures are abating.
Europe’s STOXX 600 index rose to its highest level since April last year, and London’s FTSE 100 scaled a fresh four-and-a-half-year high after the latest British inflation numbers, while US stock futures were mixed.
MSCI’s broadest index of shares in the Asia-Pacific region outside of Japan rose 0.4 percent.
The market spotlight was also on Japan, where the yen slid and government bond yields fell the most in two decades at one point, retreating sharply from the BOJ’s 0.5 percent ceiling after policymakers decided to keep yield curve controls in place.
The central bank last month stunned the market by raising its cap on the 10-year yield to 0.5 percent from 0.25 percent, doubling the band it would permit above or below its target of zero percent. Since then, speculation had swirled that the central bank could tweak its yield curve control policy further or even scrap it.
However, instead of changing its stimulus program, the BOJ crafted a new weapon to prevent long-term rates from rising too much — a move some analysts took as a sign BOJ Governor Haruhiko Kuroda would hold off making big policy shifts during the remaining months of his term, which ends in April.
“This step will allow us to push down longer-term interest rates, without directly affecting supply and demand of the cash Japanese government bond market,” Kuroda told a news conference. “We’d like to use this tool for various maturities, and in various ways.”
The 10-year yield plunged as much as 14 basis points to 0.36 percent at its lowest point, which would have been the biggest one-day decline since September 2003, before edging back up to 0.43 percent as of 6:24pm. The Nikkei 225 index jumped 2.5 percent to 26,791.12, its highest close since Dec. 19 last year.
“It was a tough day for the bond vigilantes who were positioned to bully the BOJ into a policy change not justified by their economic forecasts,” Westpac Banking Corp senior currency strategist Sean Callow said.
US DOLLAR RISES
The US dollar was up 1 percent at ￥129.53, but well off session highs.
The dollar index, which measures the safe-haven US dollar against six peers, rose 0.4 percent. The pound rose more than 0.4 percent, and the euro gained 0.6 percent.
Meanwhile, oil prices rose yesterday, extending the previous session’s gains, driven by optimism that China lifting its strict COVID-19 curbs would lead to a recovery in fuel demand in the world’s top oil importer.
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